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Methodological Centre for Vocational Education and Training

Study of Food Products

and Beverages Industry

Research report on skill needs

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STUDY OF FOOD PRODUCTS

AND BEVERAGES INDUSTRY

Eksperts: Gitana Alenčikien÷, Violeta Averjanovien÷, Saulius Baliukynas, Giedr÷ Beleckien÷, Gintautas Bužinskas, Vaidas Daujotas, Vincentas Dienys, Bronislava Kaminskien÷, Rūta Karvelyt÷, Vitalija Motiekait÷n÷, Candy Murphy, Raimondas Narkevičius, Almina Pačešiūnien÷, Vita Povilionyt÷, Loreta Račelien÷, Albertas Šlekys, Laima Teliukien÷, Lina Vaitkut÷

We are sincerely grateful to sector organisations and everyone who helped us in this activity. We hope that the

information presented will be helpful while planning employees training and performing other tasks.

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SUMMARY

The sector of manufacture of food products and beverages (FB) is defined according to the activities of the international NACE classification. It consists of the following nine sub-sectors: meat (further referred to as ME), fish (further referred to as FI), fruit and vegetables (further referred to as FV), oils and fats (further referred to as OF); diary products (further referred to as DP), grain (further referred to as GR), animal feeds (further referred to as AF), other food products (further referred to as OFP) and beverages (further referred to as BE).

International trends

The manufacture of food products and beverages is the biggest sector of manufacture in the European Union. It employs 4 million employees, makes up 1.8 per cent of the EU gross domestic product, has a relatively high number of economic entities and a huge demand for the labour force. The characteristics of the sector, as compared to the other economic sectors, are the following: part-time employment, young employees (aged up to 30) and a substantial share of workers with low qualifications. The growing competition, poor working conditions and stricter legal requirements had an impact upon viability of the sector and sharpened the problems related to the attraction and maintenance of staff.

Although short-term and medium-term future prospects of the sector are positive, the possible threats create a need to invest into employee training and self-improvement and focus on product development, innovations and business development in the entire sector, embracing both small and medium-size enterprises. To have the manufacture of food and beverages effectively adapt to changes, managers, qualified workers and professionals, research and development as well as technical staff should be provided with adequate training and support. Training should be oriented towards filling in the current gaps of skills and satisfaction of the emerging demand for them. Regional authorities and national training establishments will play a key role in helping enterprises meet the emerging challenges and ensuring sector development in Europe.

Trends of Food products and beverages sector development in Lithuania

Enterprises. According to the preliminary data of 2007, there were 1,094 enterprises operating in the sector. Out of that number, 47 per cent of enterprises specialised in manufacture of food products; 23 per cent of companies were involved in production, processing and preserving of meat and meat products and 11 per cent of enterprises manufactured beverages. The remaining enterprises (comprising one fifth of the total) carry out activities in the other six sub-sectors. The sector is predominated by very small (with up to 9 employees) and small (from 10 to 49 employees) enterprises, making up 80 per cent of the total number of the sector enterprises.The biggest concentration of enterprises is in Vilnius and Kaunas counties.

Employees. According to the preliminary of 2007, the sector employed 51,700 people. They account for more than 3 per cent of the total number of employees in the overall Lithuanian economy. Employees in the sub-sectors of other food products, meat and diary products made up 70 per cent of the total number of the sector employees. During the period of five years (in 2003 – 2007) the number of staff in very small and small enterprises was dropping.

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Performance indicators. During the recent five years, the turnover in the FB sector has gone up. According to the preliminary data of 2007, the biggest turnover was in the sub-sector of dairy products and other food products, followed by the meat and beverages sub-sector. In 2003 - 2007, the level of productivity rose in all the FB sub-sectors. The biggest growth was seen in the sub-sectors of fruit and vegetables, meat, oils and fat, and beverages. In the five year period, the value-added created by the sector went up my slightly more than 1.5 times. The earnings of employees were increasing in all the FB sub-sectors, yet they remained lower than the national indicator. As compared to the other branches of manufacture, earnings offered to the FB sector staff are among the lowest. With regard to the volume of export, the FB sector is one the leaders among the branches of manufacturing. Generally speaking, the FB sector is sufficiently competitive on the international scale.

Technologies. Modern technologies are used by almost 55 per cent of the FB enterprises and 64 per cent of them are planning to use modern technologies in the future. The information technologies to be used by the FB sector in the future include production planning and accounting software and e-trade technologies.

Development trends. The sector forecast for 2012 is rather optimistic: the turnover in the majority of sector enterprises will continue to grow (with the exception of oils, fats and grain) but the rate of growth is likely to slow down. One of the reasons for that is insufficient labour force resources. The volume of production should be increased by resorting to some other sources, for example, increasing the labour productivity, which is currently quite low, and applying new technologies. The biggest threat to a successful business development is the shortage of ‘qualified workers’ or simply ‘workers’ and the ‘tax system’.

Demand for employees. The turnover of staff in the FB sector is rather high, accounting for 43 per cent per year. Its rate is the highest in the group of manufacturers and other workers. The main reasons for that are emigration, seasonality of work and new technologies. The groups of employees which are most difficult to find are manufacturers and other workers, whereas professionals are less of an issue. The tension level (the ratio between the number of vacancies and the number of the unemployed) in the sector is less than 1 and therefore is smaller than the relevant national indicator. This means that the quantitative supply of employees in the sector is lightly exceeding the demand for them. Noteworthy, the tension level among different sub-sectors is not the same.

Changes in skills. The sector employees mostly lack foreign language and work organisation skills. In addition, professionals require work planning and control as well as computer literacy skills. Qualified employees lack responsibility, duty and willingness to learn, whereas professions need innovation and management skills.

Supply of employees. In 2006, the entire manufacturing industry, which includes the FB sector, employed almost three times more qualified workers than professionals (including technicians). According to the preliminary data of 2006, the number of admitted students in the FB sector training programmes and the number of graduates from them reveal different trends. First, the number of students admitted into higher education establishments exceeds the number of students in primary vocational training programmes almost 2.5 times. Second, the number of graduates from higher education establishment is slightly exceeding the

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5 number of vocational training graduates. This means that the gap between the supply and demand for workers will continue to increase in the future, causing serious problems for business development.

Recommendations:

• Although the level of employment in the FB sector enterprises among the group of workers is four times

bigger than in the group of professionals (including technicians), the number of admitted students to the FB sector programmes of higher education exceeds the number of students to the relevant vocational training programmes 2.5 times (data of 2006). As a result of such disproportion, the supply of professionals in the labour market exceeds the demand for them, whereas qualified workers are lacking. Therefore it is recommended to review the plans of admitting students into the state funded higher education and vocational training programmes of the FB sector.

• The shortage of ‘manufacturers’ and ‘other workers’ in the sector is mostly linked to the lack of workers trained by vocational training establishments. The latter is associated with the low level of prestige, in the eyes of society, of vocational training. Therefore it is recommended to advertise and raise awareness about food manufacturing occupations among the youth (organising advertising campaigns in general education schools, in the press, television and showing examples of successful careers pursued by the graduates, etc.). The attractiveness and prestige of the sector occupations should also be increased by the food manufacturing enterprises. They could offer higher remuneration for work and social guarantees to their employees, improve working conditions and motivate staff by offering refresher courses abroad. • Certain sector enterprises (particularly those operating in the grain and animal feed sub-sectors) lack

food machine operators. Presently, no training is available to offer such occupational qualification. Previously, workers of similar qualification were trained under the Food Industry Equipment Operator and Laboratory Assistant Training Programme. Therefore it is recommended to modify the programme to include training of food machine operators.

• The sector of the FB manufacture offers a huge variety of occupation posts and competences. Therefore, the annual demand for employees in certain occupation posts is rather high. Therefore it is recommended to organise training based on modules. In the beginning students would attend obligatory training modules offering general competences required by the FB sector and later they could choose additional competences necessary for the occupation of their choice from the range of optional modules. The optional modules could be agreed with the interested sector enterprises which usually employ the graduates.

• The analysis performed shows that enterprises willing to respond to market changes in a more flexible and speedy manner will speed up the use of modern production technologies. That will also reduce the need for workers with low qualification and increase the demand for higher skilled workers (for instance, operators). Therefore, it is recommended to organise practical training for employees (for example, by appointment of enterprise workers as manufacturing practice supervisors or tasking them to perform other assignments). It the long-run this would ensure smaller discrepancy between the supply and demand for employees of certain qualifications.

• The new form of organisation of apprenticeship vocational training has been established by law. It means on-the-job training in an enterprise, institution, organisation, farm or with a free-lance trainer. Theoretical training may be carried out in vocational training establishment or another type of school. The experience of other countries shows, that the advantages of apprenticeship include smaller training

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6 costs and work with modern technologies. Enterprises are recommended to use the opportunity to train the employees according to their own needs and, at the same time, increase the attractiveness of vocational education and training.

• According to the survey findings, all the sector employees lack foreign language and work organisation

skills. n addition, professionals require work planning and control as well as computer literacy skills. Qualified employees lack responsibility, duty and willingness to learn, whereas professions need innovation and management skills. Therefore, to ensure appropriate qualification of employees, training/study programmes should be updated with regard to the identified needs of skills.

Structure of the study. The study comprises 6 chapters. Chapter 1 makes a brief overview of the objectives of the study, the concepts used by it and the methodology of the social survey. In addition, it describes the structure of the sector of manufacture of food products and beverages sector. Chapter 2 explains the international trends in the sports sector development. The purpose of Chapter 2 and Chapter 3 is to analyse performance indicators of the sector and make an assessment of the employee demand. The indicators used in Chapter 3 are based on the data developed specifically for the study and publicly available information, whereas the indicators in Chapter 4 include findings of the survey. Chapter 5 analyses the supply of employees and Chapter 6 provides recommendations developed on the basis of information analysis. Their aim is to to reduce discrepancy between the supply and demand of employees in the sports sector.

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TABLE OF CONTENTS

1. RESEARCH METHODOLOGY ... 7

1.1. Introduction... 7

1.2. Authors of the Study... 7

1.3. Goal of the Study... 7

1.4. Methodology... 7

1.5. Definition of the Sector ... 7

1.6. Sociological Survey of Sector Enterprises ... 8

2. INTERNATIONAL TRENDS ... 10

2.1. Introduction... 10

2.2. Overview of the sector... 10

2.3. Relationship between food and beverages and other sectors ... 14

2.4. Employment in the Food and Beverage Sector... 15

2.5. Factors driving developments in the Food and Beverages Sector... 18

2.6. Impact of these developments on employment and skill needs... 25

2.7. Summary ... 30

3. STATISTICAL CHARACTERISTICS OF THE SECTOR... 32

3.1. Introduction... 32

3.2. Briefly about the Sector of Manufacture of Food Products and Beverages ... 32

3.3. Enterprises ... 33

3.4. Employment in the Sector ... 34

3.5. Performance Indicators ... 37

3.6. Development Trends ... 39

3.7. Summary ... 40

4. CHARACTERISTICS OF SECTOR BASED ON SURVEY FINDINGS ... 42

4.1. Introduction... 42

4.2. Performance indicators ... 42

4.3. Employees... 45

4.4. Forecast of Demand for Employees in the Future... 47

4.5. Summary ... 48

5. SUPPLY OF EMPLOYEES ... 49

5.1. Introduction... 49

5.2. Education and Job Groups... 49

5.3. Supply of Employees by Areas and Level of Education... 51

5.4. Supply of Employees in the FB Sector... 52

5.4.1. Supply of Skilled Workers (Manufacturers) for the FB Sector... 53

5.4.2. Supply of Professionals, Including Associate Professionals and Technicians, for the FB Sector... 54

5.5. Summary ... 54 6. RECOMMENDATIONS ... 56 REFERENCES ... 58 ANNEX 1 ... 59 ANNEX 2 ... 60 ANNEX 3 ... 62 ANNEX 4 ... 65

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1. RESEARCH METHODOLOGY

1.1. Introduction

Since 2005, the Methodological Centre for Vocational Education and Training has been performing a project,

Development of the National System of Vocational Education and Training Standards. The purpose of the project is to develop the national system of vocational education and training standards which would help increase conformity between training and education on the one hand and global performance needs on the other hand as well as provide better conditions for life-long learning. One of the main activities of the project is to examine six economic sectors with a view to assessing the prospects of their development and the impact on the number of employees and training needs. The project is of national importance and is funded by the European Social Fund.

1.2. Authors of the Study

The study was developed by a group of experts representing a variety of Lithuanian bodies and establishments (educational, scientific, statistics, business, etc.). Assistance was provided by experts from Ireland having the relevant expertise in implementing similar type of activities and identification of necessary skills.

1.3. Goal of the Study

The main goal of the study is to analyse the trends of development of the manufacture of food products and beverages sector in Lithuania and other countries and, on the basis of that, determine the changes in the number of employees and training needs for the upcoming five years as well as provide concrete recommendations to improve conformity between the supply and demand of the labour force.

1.4. Methodology

The sectors are studied using a single methodology developed together with the Irish experts in 1999. The study of the manufacture of food products and beverages sector encompasses the following phases:

1. An overview of publicly available information in Lithuania and other countries about the sector and related areas as well as the analysis of official statistics about the sector;

2. A survey of sector enterprises by means of interviews and postal questionnaire surveys; 3. Analysis of all information and identification of change factors in the sector;

4. Projection of employment in the sector;

5. Assessment of the sector training needs in the upcoming five years.

1.5. Definition of the Sector

The sector of manufacture of food products and beverages has been defined according to the activities included into the NACE classification. The definition has been modified by the Lithuanian and EU experts.. This made it possible to compare the findings of the study with the international results. By definition, the sector of manufacture of foods products and beverages (further referred to as FB) consists of the following nine sub-sectors (see Fig. 1.1): meat (further referred to as ME), fish (further referred to as FI), fruit and

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vegetables (further referred to as FV), oils and fats (further referred to as OF); diary products (further referred to as DP), grain (further referred to as GR), animal feeds (further referred to as AF), other food products (further referred to as OFP) and beverages (further referred to as BE).

Fig. 1.1.Manufacture of Food Products and Beverages according to NACE Classification

1.6. Sociological Survey of Sector Enterprises

A postal questionnaire survey of enterprising operating in the sector of manufacture of food products and beverages was performed in 2007. The sample for survey was compiled on the basis of the data from the Registry of Economic Entities, as well as by looking at the type of the prevailing economic activity (according to the Classification of Economic Activities in the European Communities, NACE) carried out by the enterprise. The total number of enterprises selected was 1012. The participants of the postal questionnaire survey were asked to return the filled out questionnaires after several weeks. When the questionnaires were sent out to the respondents, telephone calls were made to remind them about the deadline for sending the questionnaires back. In this way, a sufficient level of response was secured.

Manufacture of Foods Products and Beverages Sector (FB)

Meat (ME)

Grain (GR) Fish (FI)

Animal Feeds (AF) Fruit and Vegetables (FV)

Oils and Fats (OF)

Dairy products (DP)

Other Food Products (OFP)

Beverages (BE)

Production, processing and preserving of meat and meat products (15.1)

Production, processing and preserving of fish and fish products (15.2)

Production, processing and preserving of fruit and vegetables (15.3)

Manufacture of vegetable and animal oils and fats (15.4)

Manufacture of dairy products (15.5)

Manufacture of grain mill products, starches and starch products (15.6)

Manufacture of prepared animal feeds (15.7)

Manufacture of other food products (15.2)

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9 Interviews were made with the respondents from the leading enterprises. The total number of enterprises interviewed was 12. The information received was used to assess training needs in the sector of manufacture of food products and beverages.

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2. INTERNATIONAL TRENDS

2.1. Introduction

The food and beverages industry is the largest manufacturing sector in the EU, employing almost 4 million people. Its contribution to the EU gross domestic product amounts to around 1.8% (European Foundation for the Improvement of Living and Working Conditions, 2004a). The industry is also characterised by a high level of labour intensity and while traditionally it was a relatively stable sector, in recent times the overall share of employment in the EU has dropped quite dramatically.

There was an overall decrease in jobs over the period 1999-2004 of 11.4%, from 4.4 million to 3.9 million. The sector is faced with an unprecedented number of challenges today, with widespread restructuring in activity occurring across the EU (European Foundation for the Improvement of Living and Working Conditions, 2004b). These developments are primarily driven by the need to enhance competitiveness and address local and global changes affecting the industry. The voice of the consumer and the retailer has increasingly shaped developments in the food sector in recent years, as a result of growing concerns over food safety and a growing demand for higher quality and more diverse foods, driven by increasing incomes across the EU.

The low skills base in the sector, coupled with high levels of part-time working and slowness to adapt to the changing demands of consumers are impacting negatively on the sector’s performance. Such factors, along with increased competition from developing countries, increasing consumer demands and stricter quality controls threaten the future viability of the sector within Europe.

This section sets out the key developments in the European food and beverages sector and related employment, skills and training needs. Firstly, the sector is defined and the overall position of the sector is described. The paper then goes on to assess the relationship between food and beverages and other sectors. It then outlines the current employment situation of food and beverages in Europe before assessing both recent economic developments in the sector and likely future developments. The implications of these developments for future employment, skills and training are then analysed.

2.2. Overview of the sector

The food and drink manufacturing industry is very broad but can be defined as the preparation of food and drink products ready for sale and consumption. It involves the sourcing of ingredients, processing, preservation and packaging. It also includes product research and design, taste testing and marketing (European Foundation for the Improvement of Living and Working Conditions, 2004a).

The EU-25 traditionally has a positive trade balance with the rest of the world in food products, beverages and tobacco. (Eurostat, 2006a). The sector accounts for 4.9 % of total industrial exports and 3.8% of total imports. This trade surplus is due to strong export performance in a number of subsectors, mainly beverages, bread, sugar, confectionary and other food products and dairy products. The United States is the largest export market for European food products, beverages and tobacco as a whole (21 % share of exports) and a particularly significant market for beverages (42 % of all EU exports) (Eurostat, 2006a).

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Structure of Food and Beverages in Europe

Together, food products, beverages and tobacco make up 11.3% of the total value-added of EU industry. Within the sector, the manufacture of bread, sugar, confectionery and other goods is the largest sub-sector in terms of value-added and number of persons employed (see Table 2.1). This sub-sector accounted for over a third (34.9 %) of the total sectoral value added in 2003. The second and third largest subsectors were beverages and meat processing which together accounted for a further third of both sectoral value added (individually accounting for 17.7 % and 16.0% respectively) and sectoral employment (individually accounting for 9.7 % and 22.4% respectively).

Table 2.1. Manufacture of Food products, beverages and tobacco Value added (EUR mn) Share of Industrial value added (%) Number of persons employed 000s Share of industrial employment

Food products, beverages & tobacco 192.000 11.3 4,490 12.8

Meat 30.605 1.8 1,004 2.9

Fish 3.752 0.2 129 0.4

Dairy Products 18.000 1.1 390 1.1

Bread, sugar, confectionery & other goods

66.657 3.9 1,911 5.4

Miscellaneous food products 28.000 1.7 550 1.6

Processing and preserving of fruit and vegetables

10.900 0.6 265 0.8

Manufacture of vegetable and animal oils and fats

4.000 0.2 59 0.2

Manuf. of grain mill products, starches and starch products

6.026 0.4 108 0.3

Manufacture of prepared animal feeds 7.000 0.4 130 0.4

Beverages 33.814 2.0 437 1.2

Tobacco 10.000 0.6 60 0.2

Source: Eurostat, 2006a

The food and beverage industry accounts for 14% of total turnover in the EU industry ahead of both the automobile and chemical industries. In 2005, turnover was €836 billion, an increase of 2.6% from 2004.1 Since 2001, turnover in the EU food industry has increased by €30 billion. However, the enlargement of the EU in 2004 is partly responsible for the high level of growth during this period (CIAA, 2006) (see Figure 2.1).

1

Turnover: measured as sales from the food and beverage industry. The figure does not include artisan production and farmgate sales.

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12 Fig. 2.1. Turnover in the EU Food and Drink Industry, billion €, current prices, 2001-2005.

750 760 770 780 790 800 810 820 830 840 2001 2002 2003 2004 2005 Source: CIAA, 2006

The sector is characterised by a relatively large number of companies. In 2005, there were 282,000 companies in the European food and beverage industry (CIAA, 2003). Microfirms, small and medium sized ones are most common, accounting for more than 95% of the companies in the industry (see Figure 2.2). However large companies, with more than 250 employees, account for more than 50% of total production in the food and drink industry while only accounting for less than 5% of companies in the industry.

Fig. 2.2. Production, employment and share of companies by firm size, 2000

0 10 20 30 40 50 60 70 80 90 Micro-companies (1-9) Small companies (10-49) Medium companies (50-149) Large companies (+250) Production % No. employees % No. companies % Source: CIAA, 2003

France, Germany, Italy, United Kingdom and Spain together account for more than 77% of turnover in the EU-15 food and drink industry, and this pattern is also true for most sub sectors. The new member states account for 7% of total EU food and drink industry turnover, with Poland accounting for almost half of the food industry turnover in the new member states (CIAA, 2006). Many western European companies acquired food and drink companies in the New Member States before their accession in 2004 (Hamann, 2007).

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13 In a majority of member states, the food and drink industry features in the top 3 manufacturing industries in terms of turnover and ranks first in a total of 10 countries. The food and drink industry thus plays a key role in both industrial activity and employment across the EU (CIAA, 2006).

Larger companies are found to a greater extent in the North and West of Europe. The number of food and drink processing entities in the New Member States is thus proportionally much higher than in the EU-15 (Hamann, 2007) (see Table 2.2).

Table 2.2. ES EU Food and Drink Production, added value and industry structure, 2001

Production € bn¹ Value added € bn Employees 000s Number of companies Austria 11² 2 79² 1264² Belgium 24² 5 62 723 Denmark 17² 4 87² 450 Finland 8² 2 34 336 France 115³ 21 392³ 3604 Germany 110 27 597 6035 Greece 5 1 43 1036² Ireland 15 4 47 687 Italy 93 24 268 6800 Luxembourg 1 0.3 4² 226 Netherlands 39² 6 147² 855 Portugal 10² 2 104² 1916 Spain 67 14 371² 3040 Sweden 13³ 3 53 244 UK 98² 30 506² 2319 EU-15 626 145 2796 29635

Source: European Foundation for the Improvement of Living and Working Conditions, 2004a

Note: ¹: current prices; ²: more than one employee; ³: more than three employees; : more than nine employees.

Table 2.3 shows the Top 10 Food and Beverage companies within the EU and highlights the scale of turnover accounted for by these companies.

Table 2.3. Top 20 Companies in the Food and Beverage Industry in Europe

Company HQ Subsector Turnover € mn

Nestlé CH Multiproducts 52,680

Unilever NL Multiproducts 22,530

Danone FR Dairy, water, biscuits 13,700

Heineken NL Beer 10,005

Cadbury Schweppes UK Soft drinks and confectionery 9,941

Diageo UK Spirits 9,858

InBev BL Beer 8,568

Arla Foods DK Dairy 6,339

Ass. British Food UK Bakery, fats, ingredients 6,288

Danish Crown DK Meat 5,964

Sovion NL Meat and gelatine 5,915

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Scottish & Newcastle UK Beer 5,552

Carlsberg DK Beer 4,837

Barilla IT Pasta and baked goods 4,675

Südzucker DE Sugar, frozen foods, ingredients 4,575

Ferrero IT Chocolate and confectionery 4,475

Friesland Coberco NL Dairy 4,449

Tate & Lyle UK Sugar and sweeteners 4,240

Kerry Group IE Ingredients 4,129

Source: Hamann, 2007

2.3. Relationship between food and beverages and other sectors

Agriculture and food retailing are the sectors that impact to the greatest extent on the development of the food and beverages sector within Europe.

Agriculture

The Food and Beverages sector is strongly influenced by factors affecting basic agricultural production and in particular, the impact of growing concerns about food safety. Meat producers and processors in particular have been affected by the spread of disease in recent years. Increased demands from consumers have also put pressure on both food producers and processors to raise their standards and this trend has been supported by both policy and technological changes.

The Agriculture sector is itself going through a period of significant changes. These changes include reduction in subsidies for food producers and increasing exposure to international markets, changing weather patterns, increasing demand for western style food from emerging the economies of China, India etc and increasing demand for alternative land use to produce biofuels and new food products.

To best meet these developments food producers, manufacturers and retailers need to work together to ensure that quality standards are met, that customer confidence in agricultural products is maintained and that costs and profits are distributed in such a way that ensures the viability of the all of the sectors involved.

Food Retail

The retail sector in Central and Eastern Europe has developed strongly in recent years. However, Western European countries continue to dominate the sector within Europe. For example, five Western European countries, France, Germany, Italy, Spain and the UK account for two-thirds of all European retail sales (Myers, 2005).

The EU-25’s non-specialised in-store retailing sector generated EUR 800 billion of turnover in 2003, EUR 120 billion of value added, while employing 5.6 million persons. It accounted for 32.9 % of the value added created by the retail trade and repair sector and a slightly higher proportion (34.7%) of its workforce. Short-term statistics show that over the period 1995 to 2005 there was a steady growth in the volume of sales index for EU-25 non-specialised in-store retailing (Eurostat, 2006b).

In recent years the emergence of larger hypermarket chains, on an international, national and regional level has substantially increase the power of retailers. A number of leading western European supermarket and

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15 hypermarket chains, including leading players such as Metro, Carrefour and Tesco are continuously increasing their footprint within the region (CEE, 2003). Retailers now largely determine the type of food available to consumers. Retailers also determine the source of the food on sale in their retail outlets. This trend is likely to continue, with retailers placing increasing pressure on food and beverage manufacturers to meet their demands. Given the large scale of these retailers’ businesses only food producers that can provide year round, large volumes products, and have relevant IT technologies are increasingly able to do business with these customers. While this has increased profits for large retailers, the benefits for manufacturers in the food and beverage sector may not be as widespread (European Foundation for the Improvement of Living and Working Conditions, 2004c).

However counter to this trend is the growing concern on the part of customers about food products being flown around the world rather than being sourced locally along with a renewed interest in locally sourced, straight from the farm products. This is providing new opportunities for local food suppliers who can develop strong relationships with their local retailers or can develop direct distribution routes to consumers.

2.4. Employment in the Food and Beverage Sector

This section outlines recent employment trends and working conditions in the sector.

Recent Employment Trends

In 2005, 3,8 million people were employed in the food and beverage industry in the EU. Over 500,000 people are working in the food and beverage industry Germany and the UK alone (Hamann, 2007). East European countries such as Poland, Hungary, Czech Republic, Slovenia and Slovakia employ over 800,000 in the food and beverage industry.

However since 2001 the number of employees in the EU food industry has decreased by 500,000 people. From 2003 to 2004, employment within the sector decreased by 4.9% and by a further 1.5% between 2004 and 2005 (Hamann, 2007).

There are large regional differences within the European food industry. Turnover per employee varies considerably as can be seen in Table 2.4. The large Northern European economies have achieved much higher levels of productivity and given growing market pressure other economies in the south and east of Europe will be under increasing pressure to improve productivity through increasing consolidation and rationalization.

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16 Table 2.4. Turnover, employment and Turnover per Employee in Selected Member States, 2005

Country Turnover (mn EUR) Number of employees (’000) Turnover/employee ('000EUR) France 139.700 420.0 332.0 Germany 133.600 517.0 258.0 UK 102.500 462.0 222.0 Sweden 15.200 58.7 259.0 Greece 10.500 67.8 155.0 Poland 28.400 464.3 61.2 Hungary 7.500 113.4 66.0 Estonia 1,100 16.7 65.8 Source: CIAA, 2006

Increasing international competition is likely to further drive down the number of employees in the food and beverage industry in the coming years, particularly in Eastern Europe as Eastern European food and beverage companies attempt to increase productivity through the introduction of new production technologies. (Hamann, 2007). As a result many traditional SMEs are expected to go out of business unless they can become viable niche food producers.

Women account for a higher proportion of total employment in the food, beverages (and tobacco) manufacturing sector than the average in the EU-25 industry sector as a whole (41.0 % compared with 28.7 % in 2005) (Eurostat, 2006a). Indeed, women represented at least half the workforce in this sector in the Baltic Member States, Germany, the Czech Republic and Slovakia in 2005.

There is also a relatively high proportion of part-time workers in the European food, beverages and tobacco manufacturing sector - an average of 11.8 % for the EU-25 compared with the average for industry as a whole of 7.6 % (Eurostat, 2006a). This is most acute in Germany, where almost one quarter (24.6 %) of those employed in the sector worked part-time in 2005 compared with an 11.5 % share across German industry as a whole (Eurostat, 2006a).

There is also a slightly higher proportion of young workers (under the age of 30 years) in the food, beverages and tobacco sector in the EU-25 compared with industry as a whole (24.3 % compared to 21.4 % in 2005 (Eurostat, 2006a). This was most apparent in Luxembourg (28.9 % compared with 14.4 %) and Sweden (27.1 % compared with 17.1%), with other notable differences in Lithuania, Poland and the Netherlands.

Compared with many other industrial sectors, the proportion of total operating expenditure accounted for by personnel costs in the food, beverages and tobacco sector was relatively low (an EU average of 14.3 % in 2003). This reflects the relatively high level of automation now in the sector (Eurostat, 2006a).

Working conditions

Working conditions for many food and beverage operatives are difficult. The work can often be repetitive and physically demanding, with long periods of standing required. The work can also be hazardous, with higher than average injury rates – burns from ovens, cuts from knives or cleavers are common and repetitive strain injury is also a problem (Bureau of Labor Statistics, 2005). The work can also be stressful, particularly if

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17 deadlines have to be met and the working environment is noisy, limiting interaction between workers. The working environment often depends on the type of food being manufactured or processed – bakeries can be uncomfortably hot, while meat processing plants or dairies can be cold and damp. Meat and fish processing plants require workers to wear protection hats, gloves aprons and shoes (Bureau of Labor Statistics, 2005).

Skills, education and training

Very little formal education or training prior to being hired is required for many workers in manual labour jobs. However, automation is becoming more common for many activities, leading to the replacement of many unskilled workers. Many skilled workers, such as butchers, bakers and fish and poultry cutters acquire their skills on the job through both formal and informal training programmes. The length of training can vary significantly, with many of the higher skilled workers having to go through an apprenticeship (Bureau of Labor Statistics, 2005).

More highly qualified workers such as food technicians and technologists, quality control and product development personnel and marketing staff generally have third and often fourth level qualifications. Demand for these higher level skills is expected to grow fuelled by concerns about food safety, increasing customer demand for prepared foods and increasing competitive pressures which are driving greater innovation within the sector.

Few studies have been carried out on qualifications needs of the sector within the EU. However, a good deal of research has been carried out in recent years in the UK on skills levels within the sector. As the food and beverages sector in the UK faces many of the same problems as other countries, the issues identified in the UK can be used as a reference point for the sector throughout Europe.

The UK's food and drink industry has been found to have one of the most poorly qualified workforces in the UK (Improve, 2005). About 19 per cent of the sectors workforce has no qualifications, compared to the average of 11 per cent for the total UK workforce. Two-thirds of the sector‘s workforce in England do not have a qualification higher than Level 2. Just seventeen per cent of the sector’s workforce in England is qualified at Level 4 or higher (see Figure 2.4). One third of staff in the processing sector has no qualifications at all.

In addition, many UK employers in the sector complain of widespread skills shortages among the more highly skilled occupations which are having the effect of increasing operating costs and slowing down the introduction of new working practices and products within the sector.

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18 Fig. 2.4. Highest qualifications in the Food and Beverages Sector, England, 2004

0 20000 40000 60000 80000 100000 120000

No qualifications Level 2 Level 3

Source: Improve, 2005

2.5. Factors driving developments in the Food and Beverages Sector

This section looks at the key factors that are driving change in the food and beverages sector in Europe, namely:

• Economic growth

• Population growth

• Competition for Raw materials

• Power of retailers

• Globalisation/Regionalisation

• Research & Development

• Technological Developments

• Food safety and regulation

• Consumer Demands and trends

Economic growth

The general economic outlook for Europe in the medium-term is promising. This will have a positive effect on the development of the food and beverages sector. GDP for the euro area is forecast to grow by 2.5% in 2007 and 2.15% in 2008 (European Forecasting Network, 2007). In addition, the OECD (Organisation for Economic Co-operation and Development) and the United Nations Agricultural Outlook for 2006-2015 anticipates strong growth within the OECD and in emerging economies for the duration of the period under review (OECD, FAO, 2006). However, a number of factors may dampen the overall positive outlook, including increasing oil prices and growing concerns in financial markets about debt risk, as well as growth competition from emerging markets. Latin America and Asia are likely to experience strong growth, with agricultural exports in Argentina and Brazil expected to exceed that of OECD countries. Globally, the food and beverage market will continue to grow, largely due to growth in demand for western style food from the developing countries such as India and China.

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19

Population Growth

Europe’s population is expected to peak in 2022 (European Commission, 2003), but the situation varies greatly from country to country. Italy’s population for instance, is expected to start falling early in this decade, while Ireland’s will continue to increase until the middle of this century (European Commission, 2003). Overall, however, changes in population structures throughout Europe are likely to lead to increasing demand for products from Europe’s food and beverage sector.

Demographic and social changes will also have an influence on the kinds of food demanded and produced. These include increase in the number of women working, smaller families, growth in single person households and increasing aging of the European population (European Commission, 2003).

The food and beverage sector needs to respond positively to population trends, particularly the overall ageing of the population and the increasing diversification in family structures. For example, an aging population will create a growing demand for easier to open packaging and a preference for ‘soft’ foods among those with dentition problems. In addition, the population of Europe’s biggest export market, the US, is also set to age, with an overall decline expected.

Competition for Raw Materials

Increasing competition for raw materials from other sectors will having a growing impact on the food and beverages sector in the future. Such competition will push up the price of the food industry’s raw materials and place new pressures on food companies to remain competitive and profitable.

In the US up to 30 per cent of the land mass that was being used to produce food is now being diverted into the production of corn and maize for biofuels. Such trends are pushing up feed prices for farmers. Increasing demand for meat and dairy products from China and India is further driving up raw material prices for food manufacturing companies in Europe. Wheat prices this year in Europe have increased by 70% as supplies available for food manufacturing decline.

A key issue for the future will be the extent to which food producers can pass on such cost increases to retailers and ultimately to the consumer. If such costs can not be pushed on, many food and beverage producers will be under increasing pressure to remain competitive despite significant opportunities in new markets. This is likely to lead to increasing consolidation within the sector and subsequent job losses.

Power of Retailers

Despite the presence of food manufacturing giants, it is food retailers who will increasingly control the food chain with their ability to exert enormous influence over both consumers and suppliers. In 2003, the world’s top 30 grocery retailers accounted for about one-third of retail sales worldwide and for about two-thirds in Europe, with the leading 10 European retailers representing 40% of total retail sales (European Foundation for the Improvement of Living and Working Conditions, 2004a). Table 2.5 shows the top 10 grocery retailers worldwide, with Wal Mart the biggest player by far. But Europe’s own retail giants, such as Carrefour, Ahold and Tesco, are also prominent. This trend suggests that food retailing in Europe will be characterised by fewer, bigger players, more international in their structure, with US retailers seeking to increase their

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20 presence significantly. Some analysts predict that global food retailing will be dominated by as few as four to five players in the near future (Cap Gemini Ernst and Young, 2002 in European Foundation for the Improvement of Living and Working Conditions, 2004a).

Table 2.5. Top 10 Grocery Retailers worldwide, 2003

Company Country of Origin Net sales € bn Grocery sales € bn

Wal Mart US 227 99.2 Carrefour France 70.5 54.6 Ahold Netherlands 56.1 47.1 Kroger USA 47.6 33.5 Tesco UK 44.6 33.2 Aldi Germany 36.3 30.4 Rewe Germany 39.2 29.6 Metro Germany 53.6 27.1 ITM France 33.1 26.8

Schwarz Group Germany 29.5 24.5

Source: M+M Planet Retail, 2003, European Foundation, 2004a

Given the dominant position of these organisations they have an enormous influence over consumers and can also dictate to farmers and food and beverage manufacturers.

Globalisation/Regionalisation

Increasing international integration of markets in recent years has meant that agricultural and food products are increasingly traded across national borders. Within Europe, the accession of new Member States in Eastern Europe is bringing both easier access to agricultural supplies as well as new consumers (European Foundation for the Improvement of Living and Working Conditions, 2004a).

While oil prices have been rapidly rising over the last two to three years, over the past 30 years, energy has been relatively cheap and has fuelled the creation of an increasingly global food chain. Relatively low oil costs made it possible to provide all-year round foods, allows vegetables and fruits to be flown in from Africa, and shoppers to drive to out of town supermarkets (European Foundation for the Improvement of Living and Working Conditions, 2004a). However, the organisation of the food system appears to be reverting to the older system of prioritisation of local produce as a result of rising energy costs.

The global food chain has also resulted in increased competition within the sector, driven primarily by food retailers, who have enormous influence over both consumers and suppliers (European Foundation for the Improvement of Living and Working Conditions, 2004a). Concentration in retailing has also been growing. As outlined above, In 2003, the world’s top 30 grocery retailers accounted for about one-third of retail sales worldwide and for about two-thirds in Europe, with the leading 10 European retailers representing 40% of total retail sales.

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21

Research and Development

Investments in innovations will be crucial to maintaining the EU food and drink industry’s international competitiveness, although, until recently, spending on R&D in the food and beverage sector was minimal. In the EU, total industry spending on R&D reached €165 billion in 2004. The food industry only accounted for €10 billion compared to the energy industry €21 billion and the manufacture of transport equipment at €38 billion (Hamann, 2007).

R&D spending varies between countries, with the Netherlands and Finland among the highest spenders in the EU, with a R&D intensity of 0.50% on average. Generally, countries in the South of Europe spend less on R&D, when compared with their Northern counterparts, due to the more fragmented nature of the sector in Southern states, along with a stronger preference for fresh and low-processed food in the latter countries. The R&D spending in the New Member States is very low compared to the EU-15 (Hamann, 2007).

Only around 1% to 1.5% of the food industry’s total investments are on R&D. A survey carried out in 2006 among European, American, Australian and Japanese food companies showed that European food companies spent proportionally less on R&D than their competitors in the other countries (Hamann, 2007). Food companies’ expenditure on R&D as a percentage of turnover is:

• Japan 1.21

• Australia 0.40

• USA 0.35

• EU-15 0.24

Expenditure on R&D also varies within the food and beverage sector. Food companies with above average R&D spending are those producing ingredients or healthy (functional) food (see Table 2.6).

Table 2.6. R&D spending in selected Top-20 EU food and drink companies Company R&D spending

€mn

R&D in % of turnover

Sub-sector

Vilmorin Clause, FR 36 7.1 Vegetable seeds and biotech

Danisco, DK 126 4.5 Ingredients and sugar

Kerry, IE 125 2.8 Ingredients and dairy

Numico, NL 45 2.3 Nutritional food

Raisio, FI 10 2.4 Functional food and other goods

CSM, NL 35 1.3 Ingredients and other foods

Barilla, IT 30 1.2 Pasta and baked goods

Source: CIAA, 2006

Looking to the future, survey data from 2005 shows that 48% of EU food and drink companies are not planning to expand their R&D expenditures, and 4% are considering to close down R&D activities (Hamann, 2007). These developments will further push R&D activities into the large companies, who on the other hand, are planning to increase R&D expenditures. From 2003 to 2005 large companies’ expenditures on R&D increased by €10 billion and in 2005 the aggregated R&D spending of top-20 EU food and drink companies reached €1.8 billion.

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22 A range of incentives for food and beverage companies and other stakeholders to invest in R&D are available at EU and national level. For example, EU Structural Funds, research programmes such as the Co-operation Programme, as well as national governments’ funding streams have been made available to small, medium and large companies to fund new and innovative technologies, sustainable production methods and new approaches to logistics within the food and beverages sector.

Technological Developments

The key technological developments driving the sector are:

• Biotechnology

Biotechnology, including diagnostics, genetics and breeding technologies, environmental impact assessment and risk analysis, has grown rapidly in recent years and has had a great impact on the food and beverage sector. While this technology obviously has great potential to produce more and better food products at lower costs, including genetically modified crops and animals, there are real fears about the effects of the technology on animal and human health and on the environment. The food industry needs to develop the competence to both harness and regulate this new technology. It also needs to ensure better communication between the scientific community and consumers.

• Developments in Information and communications technology (ICT)

Developments in new technology are having enormous effects on the food industry. They have completely changed the way farmers, food processors and retailers and customers interact. Increasingly it is only food producers that have an ICT capability that retailers will work with. IT also allows firms in the sector to capture a growing range of market information and intelligence. Niche and specialist suppliers are increasingly selling their products direct to customers on the internet. Information technology has also changed the way quality control is ensured within the sector. Increasingly modelling of changing consumer attitudes and purchasing behaviour will be used to help firms to responsive rapidly to changing demand.

• Production and processing technologies and systems

Improved production and processing technologies (including ingredient technology; food microstructure, flavour and quality; minimal processing technologies; pathogen control systems, including risk analysis methodologies; food irradiation; high pressure technology and robotics) are increasing the ability of the sector to meet customer demands for guaranteed food safety, assured freshness and quality.

The rate at which these technologies are introduced and the extent to which they are diffused throughout the sector will play a key role in determining the future competitiveness of the European food and beverages sector.

Food safety and Regulation

Safety and environmental concerns have increasingly shaped the farming and food system in Europe and have led to EU Directives on food safety. Crises over BSE, foot and mouth disease, dioxin-contaminated animal feed, as well as the GM food debate, have put the spotlight on food safety and the impact of food and farming on the environment as never before. The Belgian dioxin scandal, in particular, prompted the

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23 European Commission to adopt a White Paper on food safety covering all aspects of food products from ‘farm to table’. The White Paper led to a landmark General Food Law Regulation in 2002, which set out the general principles of food law, and provided the legal basis for the creation of the European Food Safety Authority (EFSA). From the food and drink manufacturing industry’s perspective, food safety is crucial in building consumer confidence in its products. Above all, ‘the industry needs transparent, predictable, efficient and responsive decision-making procedures to encourage innovation’ (CIAA, 2001, in European Foundation for the Improvement of Living and Working Conditions, 2004a).

Consumer Demands and Trends

Arguably the most important driver of change is trends in consumer demand. The factors that influence consumer demand for food and drink products are complex:

• demographic and socio-economic change;

• busier lifestyles;

• health, nutrition and safety concerns;

• environmental and ethical concerns;

• migration and demand for ‘ethnic foods’.

The growing recognition of the value of a well-balanced diet in order to stay healthy has perhaps been central to calls for healthy foods, with many food producers cashing in, producing and promoting health or functional foods intended to give specific medical or physiological benefits, e.g. spreads that reduce cholesterol or pro-biotic yoghurt drinks.

A 2002 status report on nutrition in Europe recognised that good nutrition can help to reduce the prevalence of many common diseases, such as cardiovascular disease, cancer, diabetes and obesity (European Commission, 2002). Dietary habits and intakes depend on individual choices (cultural influences, food preferences) as well as socio-economic and environmental factors (affordability and availability of food products, quality and safety of products, etc). The EC Treaty, the White Paper on food safety, Community action programmes in public health, all illustrate the European Union’s responsibility for, and commitment to, improving nutrition and health. However, there is growing frustration among health professionals when it comes to what people are eating. For instance, the UK’s Food and health action plan (Department of Health, 2003, in European Foundation for the Improvement of Living and Working Conditions, 2004a) found that:

• advice on healthy eating is consistent and well established based on sound evidence;

• few people currently follow Government advice for a healthy diet;

• most people eat more saturated fat, salt and sugar and less fruit and vegetables than experts recommend;

• the diet of people on low incomes is an area of particular concern.

If diet-related diseases continue to grow, health professionals may be successful in persuading policymakers that the traditional health education approach is insufficient. Among the ideas that are gaining currency are linking social insurance contributions to body mass index in Austria and a tax on fatty foods in the UK (European Foundation for the Improvement of Living and Working Conditions, 2004a).

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24 On the other side of the equation is the reduction in the available of time available to Europeans to prepare a healthy meal, resulting in a greater demand for ‘convenience foods’. The Kerry Group estimates that as much as 15% of all food consumed daily in the US is now eaten in the car, a phenomenon known as dashboard dining (Feeney, 2002, in European Foundation for the Improvement of Living and Working Conditions, 2004a). The increase in the consumption of convenience foods has also resulted from food producers targeting snack foods at teens and ‘tweens’. While some European countries may be slower to follow these trends, nevertheless, greater time pressure on many people’s lives is increasing the demand for convenience foods and ready meals, snacking and snatched meals, and eating out (European Foundation for the Improvement of Living and Working Conditions, 2004a).

As a result of growing concerns about rising obesity levels and genetically modified foods, the ‘diet’ food industry and the organics sub-sector are expected to show particularly strong growth. The diet-related food and drink market is expected to grow by 3.1% in Europe and 3.6% in the US between 2006 and 2012 (just-food, 2006). In global terms, the United States of America, United Kingdom and Germany are going to be the key geographical areas of growth for the organic food market. Germany’s organic food market will accelerate with the highest annual growth rate of 12% for the five-year period 2007-2011 (China CCM, 2007).

In addition, the beverages subsector is also expected to show strong growth in Europe, particularly for soft drinks and bottled water, although demand for both beer and coffee within Western Europe is likely to decrease (Canadean, 2007).

While the food and beverage sector is likely to continue to grow in the medium term, due to increased demand driven by higher levels of disposable incomes of consumers, the industry needs to take into account a number of challenges that lie ahead, namely, rising oil prices, greater uncertainty in global markets, the diversifying needs of consumers and the relinquishing influence manufacturers have over the goods they produce. A better understanding of these issues by company-owners and managers is required for the sector to continue to be successful. For the European food and beverages industry to thrive in the future it needs to become increasingly innovative, market-led and consumer-orientated. It also needs to ensure that the image of the sector is positive and that Europeans companies are seen as dynamic, attractive to existing and potential employees and valued by the wider public. In particular the sector needs high achieving and innovative senior management and technical staff to drive the kind of positive change required to ensure international competitiveness and a positive customer outlook. Table 2.7 outlines the strengths and weaknesses of the sector, as well as the opportunities and threats it faces.

Table 2.7. SWOT Analysis of the Food and Beverages Sector

Strengths

• Food and beverages is a traditionally strong sector in the EU

• New developments in technology

• Growth in niche markets such as natural foods and convenience foods to meet consumer demands

• Positive working relationship with agricultural sector

• Developed quality/assurance systems

Weaknesses

• Weak investment in R&D compared to competitors • Increasing food scares (BSE, Avian flu)

• Difficulties in recruitment and retention of high calibre staff

• Low level of investment in staff development • Lack of strategic management and development

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25

Opportunities • New technological innovations • Expected growth in productivity

• Consumer demands and quality controls likely to encourage higher standards

• Opportunities for growth as incomes rise in Central and Eastern European countries • Further development of specialised, niche

markets

• Increasing globalisation

Threats • Strength of retail sector

• WTO Agreements likely to lead to increased exposure to international competition

• Potential decline in demand for some products within the domestic market

• Rising oil prices likely to reduce profit margins • Increasing competition for land to grow bio fuels and

other food products resulting in increasing grain-based food prices

The European Monitoring Centre on Change (2006) indicates the role that the various stakeholders involved in the sector need to play (see Table 2.8) if the European food and beverages sector is to develop and compete effectively with manufacturers from newly emerging markets, including Brazil and China. It highlights how European manufacturers need to work in partnership, with clearly defined roles and responsibilities if they are to be successful.

Table 2.8. Roles and Responsibilities of Relevant Stakeholders for the Development of the Food and Beverage Sector

Player Action

Multinational

companies •

take the lead in the innovation process

• self-regulate on the issue of labelling through the creation of ‘platforms’, bringing together different actors

SMEs exploit expert potential of niche products • address succession crises

• self regulate on the issue of labelling through the creation of ‘platforms’, bringing together different actors

Trade unions support and encourage innovation culture in companies Regional authorities support SMEs in realising export potential

• encourage networking among SMEs and between big players and SMEs • facilitate access to ERDF and ESF

• organise information events addressing the succession issue in SMEs Governments encourage innovative culture and entrepreneurial spirit through the educational

system

• explore further present eating habits taking into account lifestyle changes • improve teaching about nutrition, food preparation and a healthy lifestyle in

schools Source: European Monitoring Centre on Change, 2006

2.6. Impact of these developments on employment and skill needs

In this section of the report we highlight how the developments outlined above will impact on employment and related skill and training needs in the future.

Employment

Employment in the food and beverage sector in Europe is likely to continue to fall largely as a result of increasing productivity. This will result in particular in a drop in employment opportunities for unskilled and semi-skilled workers. (c.f. Simpson and Stalker, 2004).

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26 As was shown earlier, many of those working in the food and beverages sector are unskilled or semi-skilled, traditionally requiring little training to carry out their work effectively and efficiently. However in the future additional training will be needed to ensure that such employees have the skills to comply with new regulations, work with new technology and produce the type of goods that meet the increasingly diverse needs of consumers.

Given the wide range of complex factors impacting on the competitiveness of the European food and beverages sector it is particularly important that European companies have the technical, professional and management skills to allow such companies to anticipate and adapt to changing demand and market pressures, and to drive innovation.

Skill Needs

A recent study on the food processing sector in Ireland by Price Waterhouse Cooper (PWC) indicates what the key skills needed in the sector in the future will be. (Table 2.9)

Table 2.9. Future skill needs in the European food manufacturing sector

Skill Sets Key Skills Trends in quantity and quality

of skill needs R&D/ New product

development (NPD) and Quality control skills

Food technology/science skills NPD commercialisation skills Product research skills Lab Technician skills New packaging design skills Quality control/auditing skills HACCP skills

Sensory analysis/product tasting skills

Increasing numbers will be required due to growing demand for new product innovation with a growing demand for advanced technical competencies and a strong commercial focus Processing skills Product management skills

Production supervisory skills People management skills

Operative skills (Existing technology, new processing and craft workers)

Quality control skills Food safety skills Food hygiene skills

World class manufacturing skills Total quality management skills Basic numeracy/literacy skills Production management skills

Reduced numbers but need for increasing efficiency and for greater competency in food quality and safety and in supervisory and production and people management skills.

Sales and marketing skills

Marketing skills Sales skills Branding skills Market research skills Market development skills Customer interface skills Language skills Negotiation skills

Category management skills Strategic account management skills

Reducing numbers as retailers consolidate but need for stronger customer focus and technical appreciation of foodstuffs among sales and marketing staff

Support skills General management skills Finance skills

Human resourcel skills Business planning skills IT skills

Engineering skills

Reducing numbers due to rationalisation with a growing demand for people and change management skills

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27

Training skills

Change management skills Procurement skills Regulatory skills Source: PWC, 2002

The PWC study also summarised the key skills gaps in that exist the food and beverages industry. (Table 2.10.)

Table 2.10. Key skills gaps in the food and beverages sector

Skill Sets Key Skill Needs

R&D/NPD/Quality Control Skills

Skills needed to commercialise NPDs Product Research/NPD Skills Operative Skills (existing technology) Operative Skills (new tech/process) Operative Skills (craft workers) Production Supervisory Skills Processing Skills Operative Skills (existing technology)

Operative Skills (new tech/process) Production Supervisory Skills Operative Skills (craft workers) Sales and Marketing Skills Marketing Skills

Language Skills Negotiation Skills

Category Management Skills Product Research/NPD Skills

Support Skills Training Skills

IT Skills (particularly those underpinning supply chain management and logistics processes)

Source: PWC, 2002

An Australian study also highlights the extent to which the key drivers of change will impact on skills within each of the key sub-sectors. (Table 2.11)

Table 2.11. Impact of drivers of Change on skills in Key subsectors in the Food

Drivers Food Meat Seafood

Worker attraction and retention HIGH HIGH HIGH Consumer and Customer demands MEDIUM MEDIUM HIGH Competitiveness and productivity

demands

HIGH HIGH FAIR

Business compliance HIGH HIGH HIGH

Innovation HIGH MEDIUM MEDIUM

Globalisation HIGH HIGH HIGH

Source: Australian Agrifood Industry Skills Council, 2005

The Australian Report also highlights the relationship between the different drivers of change and how a virtuous circle of positive development can be achieved.

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28 Fig. 2.5. Relationship between drivers of change within the food and beverage sector-creating a virtuous circle

Source: Australian Agrifood Industry Skills Council, 2005

A key way of addressing these interrelated issues is through the development of a strong partnership approach between the industry and the educational sector to support the development of advanced process and product development R&D and management skills and to ensure that innovations are widely known and disseminated across the sector.

Skill Shortages

Research carried out on the food and beverage sector in the UK in recent years indicates the extent of skills gaps in the sector. As can be seen from Table 2.12 below, the skills that are seen to be deficient also tend to be those that are central to performance of the job. For example, 52 per cent of establishments with skill

Skills Quality training & recognition; E-learning; Attraction & retention strategies; Flexible training strategies;

Reviewed training funding model; Recognition of skills; Aging workforce.

Industry Image Pathways; Attraction & retention; Industry promotion Skills passports (Portability & multiskilling); Working conditions; Sharing ‘best practice’.

Business Compliance Environmental Management; OHS; Insurance Licensing; Food safety. Business Management Consumer expectations; HR; Small business management; Investment in R&D; Leadership; Production costs; Globalisation; Product marketing; Supply chain; Networking;

Innovation.

Figure

Fig. 1.1. Manufacture of Food Products and Beverages according to NACE Classification
Table 2.1. Manufacture of Food products, beverages and tobacco  Value   added  (EUR mn)  Share of  Industrial value added (%)  Number of persons  employed 000s  Share of industrial  employment  Food products, beverages & tobacco  192.000  11.3  4,490
Fig. 2.2. Production, employment and share of companies by firm size, 2000
Table 2.2. ES EU Food and Drink Production, added value and industry structure, 2001
+7

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